Indonesia Mining 2012 - GBR

As with any new system, the primary difficulty is to get established.
“There still has not been a lot of demand for KCMI, however,
we believe that with time it will be the dominant resource
and reserve statement in Indonesia. That being said, this goal
will not be achieved unless our organization receives the necessary
support from the Indonesian government. This support would
come in the form of legislation that would make it compulsory
that mining companies listing on the Indonesian Stock Exchange
(IDX) to possess KCMI compliant reports. Indeed, the biggest challenge
for KCMI is that financial institutions are unfamiliar with it.
Convincing international investors that our reporting system carries
the same weight and is as credible of a document as it western
counterparts will be difficult. However, I reiterate my belief that
overcoming this hurdle is possible if we receive the support of the
government and our stock exchange,” said Budi Santoso, president
director, SRK Consulting.
“As KCMI becomes more established, it will have to demonstrate
its accountability, first domestically and then internationally. Furthermore,
for it to succeed, it must be highly regulated. Only then
will KCMI have the ability to compete with JORC reporting,” said
Terry Gray, principal, Britmindo.
That decisions are made irrespective of reality is a common complaint
about Indonesian law-making, but any potential challenges
that the law imposes does not appear to be a significant deterrent
to consultants working in Indonesia. Though there are problems,
Geomin remains positive. Established in 2004, Geomin provides
geological services for exploration of hard rock minerals and coal,
and mainly focuses on exploration up to resource definition. As a
result, the 2009 Mining Act, which does not encourage exploration,
has had an impact on Geomin. “The Mining Act has affected
Geomin with the reduction in exploration in hard rock minerals, but
fortunately we are amongst the companies operating in Indonesia
with a good track record and benefiting from increased coal exploration
in Indonesia. Currently the breakdown of coal versus mineral
work for Geomin is 50-50, but coal is showing significant growth
which is projected to continue,” said Greg Parham, CEO, PT Geomin
International.
Despite changes in the law, there are great opportunities to
be had in the country and growth is happening across the sector,
including amongst newcomers to the market. SNC Lavalin, which
operates in more than 100 countries and offers basic consultancy
through to EPCM services, has experienced rapid growth within a
two year period. “We started mining and metallurgic operations
here in Indonesia two years ago with a staff of around 40 people,
which has now grown to include more than 200 people. Two years
ago, the projects we were carrying out had an average value of
the approximately of $100,000 and we are now doing projects in
excess of $16 million. We have plans of expanding this soon to
projects with costs of upwards of $50 million. PT SNC Lavalin has
essentially expanded in little over two years into one of the leaders
in Indonesia,” said Tony Frampton, director of operations, PT
SNC Lavalin.
Perhaps the most substantial threat to the business of foreign
consultants is the PerMen 28, which requires producers to give
preference to local companies when hiring consultants. Such legislation
targets foreign consultancies such as New Resource Mining
(NRM), which caters to mid-level coal mining companies and
provides geological evaluation, mine planning, and reporting to
raise finances. “This requirement is a double-edged sword, as most
investors want to see a report that has solidity, validity, and credibility;
they will not be as confident in a report that was written by
a company that was selected based on government requirements.
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